aylwin yafele
Keeping It Simple Is Key
Companies often fail to meet their organisational targets simply by failing to define their goals. I have also come across managers who keep shifting their goals simply because they fail to articulate the key performance indicators (KPIs) of the organisation and as a result members of staff are misinformed about what they are required to do in order to arrive at the company agenda.
A good starting point would be going back to basics:
Sticking to the definition of KPIs by avoiding the use of flamboyant terminology and adding unnecessary frills are key to successful use of KPIs. I always recommend that when formulating a set of KPIs, it is of paramount importance to adhere to the original definition of KPIs. KPIs are quantifiable measurements agreed beforehand that reflect the critical success factors of organisations. KPIs thus help organisations to define and measure progress towards organisational goals. It is also important to minimise the number of KPIs that your organisation will formulate and implement. Ensure that you do not have too many KPIs as employees will easily lose sight of what they are required to do in order to meet the organisational targets. There is no recommended quantity but try to keep the quantity small. Too many goals lead to disaster.
A good set of KPIs should be:
Measurable – if one of your organisational goals is to increase sales. The KPI in relation to that goal should be for example, increasing sales revenue by 5% each quarter.
Comparable – maintain forecasted performance records, current performance records and past performance records for the KPI in question. These records should be regularly used in drawing up trends for performance appraisal.
Consistent – KPIs possess a forward looking orientation relevant to performance assessment and the achievement of long term goals. It is thus important that long term goals are not altered because of short term failures, instead concentrate on rectifying current performance to meet long term objectives. Only change organisational goals and KPIs when they have been met/surpassed rather than altering them so that it looks good on the department/company. In a nutshell, the definition and method of calculation of KPIs should be maintained as long term considerations.
Reconcilable with financial statement information (where applicable) – One of an organisation’s KPIs could be average revenue per customer. Departmental to organisational data such as the sales revenue over distinct periods (weekly, fortnightly, monthly etc) should be reconciled with figures according to financial statements to ensure congruency of goals and performance within the firm at all levels.
Finally, it is always a good start to make sure that the KPIs you formulate and implement in your organisation are a means to meeting your organisational goals.
ABOUT THE AUTHOR
Aylwin Yafele is a PhD Researcher at the Centre for Finance and Risk at Bournemouth University, UK.
Student
Manager, Performance Management Solutions at SAS
Aylwin,
I am repeating a “comment” here I made to Erik Hoffman’s article. You might consider it as one of your criteria.
My belief is for the vital and few strategic KPIs, in contrast to the many operational PIs, one should tailor them by being derived from the organization’s strategy map. Strategic KPIs can be defined as “monitoring the progress towards accomplishing each strategic objective in the strategy map.”
Since strategy is unique to any organization, their KPIs should not be what others measure (though some may apply), but rather should be what performance indicators uniquely monitor achievement and execution of the strategy against targets.
It is probably and over-simplification, but my opinion is strategic KPIs belong in the enterprise’s “scorecard” (with cause-and-effect linkages); and operational PIs should be reported in “dashboards,” Both types of measures (KPIs and PIs) are important. They serve different purposes.
Gary
Gary Cokins, SAS
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Good day Aylwin could you perhaps explain the relation that KPI brings to Key Performance Areas (KPA) and how that inturn affects the growth of a organization.